How Has One Year Under Governor Urjit Patel Been For Indian Economy?

RBI Governor Urjit Patel (Reuters)

New Delhi: The growth-inflation dynamic is the most pressing balancing act that the Reserve Bank of India has to perform. In the one year that Urjit Patel has been RBI Governor, how has the Indian economy performed on these metrics?

Inflation

Inflation has been on a downward trajectory and this is a major victory for the RBI. It has nearly halved from 4.39% when Patel became Governor to 2.17% now. It even fell to a record low of 1.46% in June. However, the credit also goes to his predecessor Raghuram Rajan, who realized that the key to healing the economy was to get inflation under control.

Growth

Growth has been sliding under Patel’s watch. Every quarter since Patel took over has seen lower GDP growth rates, culminating in a 3 year low of 5.7% in the April-June 2017 quarter. Getting growth back up to 7% and above will be a major challenge for Patel, and the RBI will have to coordinate its actions with the Finance Ministry to get the Indian economic engine revving again.

Interest Rates

As the setter of the benchmark interest rate, the Governor is responsible for one of the most important rates in the Indian economy. However, now there is a committee of 6 that decides this rate, rather than the Governor alone. Urjit Patel’s tenure has seen 2 rate cuts to the benchmark Repurchase rate (repo rate), which now stands at 6%.